I've worked with a similar setup, though never had a problem with XP at all connecting to and working with the as400 or even emulating it.

I agree with the compatablility workaround mmelby suggested.

This has worked for me with numerous applications.
Its worth a shot.

I did have some problems keeping mapped drives on xp to a win2k server. It seems that the old kixtart scripts don't like xp all that much and was causing some authentication issues for me. New version of kixtart and a new script fixed that right up.

You can also use a run as option on a program. You can set alternative user credentials if you think there is a problem with authentication.

right click on program/shortcut you want to run with alternative credentials, click run as.
Sometimes that option is not there. You may have to hold shift and right click.

NOTE: You can only do this if you have the secondary logon service running.